Evaluating the Impact of Working Capital Management Components on Corporate Profitability: Evidence from Indian Manufacturing Firms

Authors

  • Dr. Sarbapriya Ray ASSISTANT PROFESSOR, SHYAMPUR SIDDHESWARI MAHAVIDYALAYA,UNIVERSITY OF CALCUTTA,INDIA

Keywords:

Key words, Working capital management, corporate profitability, Indian manufacturing.

Abstract

Abstract:

Working capital management is a vital issue in financial decision making since it is a part of investment in asset and it directly affects the liquidity and profitability of the company. The study tries to investigate the relationship between working capital management components and the profitability of a sample of Indian manufacturing firms using  a sample of 311Indian manufacturing  firms for a period of 14 years from 1996-97 to2009-10 and  have studied the effect of different variables of working capital management including the average collection period, inventory turnover in days, average payment period, cash conversion cycle and current ratio,debt ratio, size of the firm and financial assets to total assets ratio on the net operating profitability of Indian firms. The result suggests a strong negative relationship between the measures of working capital management including the number of days accounts receivable and cash conversion cycle, financial debt ratio with corporate profitability. Previous studies regarding the average days of accounts payable reported negative correlation of this variable and the profitability of the firm. But, we have not found any statistically significant relationship between these variables. Finally, we found insignificant negative relationship between firm size and its net operating profit ratio.

Author Biography

Dr. Sarbapriya Ray, ASSISTANT PROFESSOR, SHYAMPUR SIDDHESWARI MAHAVIDYALAYA,UNIVERSITY OF CALCUTTA,INDIA

Biographical note: Dr.Sarbapriya Ray is an Assistant Professor in Commerce at Shyampur Siddheswari Mahavidyalaya (College), University of  Calcutta, West Bengal, India. He received his undergraduate and Master degree from Calcutta University. He stood third in the first class in M.Com (Taxation and Finance). After he received his M.Phil from Calcutta University and Ph.D from Vidyasagar University MBA(Finance) from Sikkim Manipal University, India, he is now further doing his research job in the field of corporate finance, industrial productivity and capacity utilisation. He has been teaching economics, financial management, accounting, etc. since 2001 in the college. He has published several articles in reputed national as well as international journals and presented papers in national and international conferences.

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Published

2012-07-01

How to Cite

Ray, D. S. (2012). Evaluating the Impact of Working Capital Management Components on Corporate Profitability: Evidence from Indian Manufacturing Firms. International Journal of Economic Practices and Theories, 2(3), 127-136. Retrieved from http://ijept.eu/index.php/ijept/article/view/Evaluating_the_Impact_of_Working_Capital_Management_Components

Issue

Vol. 2 No. 3 (2012)

Section

Articles

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